Home prices sink 3.1% in quarter

Inventory of unsold properties continues to pressure values

Prices for single-family homes fell in 43 states; values in California and Nevada tumbled more than 8 percent. (Amy Sancetta/Associated Press)

NEW YORK - US house prices sank 3.1 percent in the first three months of 2008 from a year earlier, the second quarterly decline since June after 13 years of increases, according to a government report.

Prices for previously owned single-family homes fell in 43 states, with values in California and Nevada tumbling more than 8 percent, the Office of Federal Housing Enterprise Oversight, known as Ofheo, said yesterday in Washington.

The inventory of unsold properties continues to swell, pushing down home prices. Prospective buyers face difficulty obtaining financing as lenders tighten standards and cut back on the number of mortgages they are writing, according to Paul Kasriel, chief economist at Northern Trust Corp. in Chicago.

"It's a dismal picture, there's no way around it," Kasriel said. "A complicating factor is the fact that so many homeowners owe more on their mortgages than their houses are worth. This is a financial crisis. You can't put lipstick on this pig."

The number of mortgage originations is expected to drop 18 percent this year from 2007, according to the Washington-based Mortgage Bankers Association.

Almost two-thirds of US banks have raised standards for mortgages to their most creditworthy borrowers, and three-fourths made it more difficult for people with limited or tainted credit to get loans, according to a Federal Reserve survey of senior loan officers published May 5.

Meanwhile, rates on 30-year mortgages dipped below 6 percent this week, falling to their lowest level in five weeks.

Freddie Mac, the mortgage company, reported yesterday that 30-year fixed-rate mortgages averaged 5.98 percent this week. That was down from 6.01 percent last week.

It was the lowest level for 30-year mortgages since they averaged 5.88 percent the week of April 17. After that, 30-year rates climbed above 6 percent for four straight weeks.

Rates on 15-year fixed-rate mortgages also fell, dropping to 5.55 percent, down from 5.60 percent last week. However, rates on one-year and five-year adjustable rate mortgages rose for the week.

The five-year adjustable-rate mortgage edged up to 5.61 percent from 5.57 percent last week. The rate on one-year ARMs rose to 5.24 percent, up from 5.18 percent last week.

For home sales, purchase-only prices fell an average of 1.7 percent from the fourth quarter of 2007, Ofheo said.

In Ofheo's "all-transactions" index, which includes appraisals for refinancings, prices fell 0.2 percent, according to the report.